Reigning In Our Region’s Out of Control Economic Development Programs

As the Occupy Wall Street movement continues to grow, expanding across the country with more and more people calling on the wealthiest to pay their fair share and demanding that our elected officials create good jobs, CEJ joined with advocates and policy experts earlier this week to talk about solutions to our region’s job and economic crisis.

We gathered outside a small-scale Holiday Inn on Niagara Falls Boulevard, which received a package of tax incentives to the tune of nearly $2 million from the Niagara County Industrial Development Agency (IDA) in 2007, to highlight the failures of our region’s economic development agencies.

In addition, we released a new report, Generating Waste, by The Partnership for the Public Good (PPG), produced in coordination with the CEJ, the Niagara Orleans Central Labor Council and the WNY Area Labor Federation. Generating Waste, which can be found here, focuses on the three most active IDAs in the region, Niagara, Erie, and Amherst as well as on the NY Power Authority.

The 9 IDAs in Erie and Niagara County are all separate public benefit corporations authorized by NYS to provide sales, property and mortgage recording tax exemptions to businesses. Each IDA has its own Board, staff, legal representation and consultants. The IDAs operating expenses are generated based on fees that businesses pay based on the size of their tax break.

At a time when unemployment and underemployment remain stubbornly high, and economic inequality continues to increase, New Yorkers need to take a close look at the State’s spending on economic development and the results it is yielding, especially when New York faces severe budgetary challenges and has slashed spending in most sectors of State government.

As Sam Magavern, Co-Director of PPG said, “In New York what economic development programs largely amount to is the awarding of tax breaks and other benefits to individual businesses. When all the State’s tax expenditures on business are combined, they now amount to some $8.2 billion per year-- and that is just the tax breaks, not including all the overhead and staffing costs for all of the agencies that provide those tax breaks, and not including the low-cost power allocated by the New York Power Authority. New Yorkers are receiving very little return for their billions of dollars in investment.”

The NY Power Authority is the largest publicly owned utility in the nation, providing New York with more than one quarter of its electricity and operating more than 1,400 miles of transmission lines. Run by a board appointed by governor, NYPA owns 17 power plants that supply about one fourth of the state’s electricity needs. NYPA is an unusual government entity in that it tends to run a “profit.” In 2010 NYPA reported net income of $181 million

Roger Cook, the former Executive Director of the WNY Committee on Occupational Safety and Health and a leader with the region’s Interfaith Peace Network talked about the particulars of the tax subsidy deal granted to Holiday Inn Express developer Mohan Saran. “What makes me so angry is that the developer received nearly $2 million in various tax breaks from the IDA but didn’t use this money as expected to create local jobs. He hired a construction firm from Georgia that didn’t properly train its workers and cut corners with respect to safety. Those cut corners cost a worker his life. This was a preventable tragedy. There are highly skilled construction workers eager for employment right here in Niagara County. Our IDAs need to reign in the waste and hold developers accountable.”

The Holiday Inn Express deal is just one questionable subsidy deal among many cited by PPG. According to PPG, our local IDAs are not helping to grow our economic pie by luring new business into the region. Of the 71 tax exemption deals that the IDAs of Niagara County, Erie County, and the Town of Amherst did in 2010, only one appears to involve a company coming from out of state (Triad Recycling). All the other deals appear to be expansions or relocations by companies that were already in the region.

Several speakers at the press conference identified Governor Cuomo’s new Regional Economic Development Councils as an opportunity to reign in our region’s out of control economic development programs. The Governor has created 10 Regional Councils each charged with developing a strategic plan for their region by November 14^th to help guide roughly $1 billion in state money.

Jim Briggs, president of the Niagara-Orleans Labor Council, said the Regional Councils “are an opportunity to harness local expertise and build the kind of economy day-to-day New Yorkers want and need, but this will only happen if the councils, our elected officials, and all of us, address the elephant in the room – over $8 billion a year in state spending on economic development through programs like the IDA that just aren’t providing a real return on investment.”

According to Magavern, “The goal of the report is not just to recommend changes to NYPA and the IDAs, but also to draw conclusions that are widely applicable to economic development efforts and that can help to guide the Regional Economic Development Councils as they craft their plans and criteria. The programs we investigated operate with loopholes so big you could drive a Lexus through them – literally in the case of the Amherst Industrial Development Agency. We’re hopeful that this report helps guide our economic development decisions in a new, more positive direction.”